Filtering property fact from fiction: Marshall Condon

GUEST OBSERVER

There’s been a lot of chatter lately about an impending property oversupply and waning investor demand.

Sorting through stories about the imminent burst, homeowners and investors are relishing in the news that property prices have climbed and that capital gains are plentiful. Knowing which ‘expert’ to trust can be as challenging as predicting Melbourne’s weather. Just like news has a cycle, property has one too and the same way every overnight sensation blows over, the hype of oversupply will too.

The best type of investor you can be is an impartial one, so take back the control by arming yourself with the facts and don’t let the hype hinder your future.

Fact Vs. Fiction

BIS Shrapnel recently released a report outlining that by 2017, most cities will be in the thick of an apartment oversupply and Melbourne’s inner suburbs will be among the worst hit. Sounds alarming but let’s take a look at the facts. According to the Australian Bureau of Statistics, Melbourne is Australia’s fastest growing capital city, adding 91,600 people in 2015 – 2.1 percent more than Sydney.

Within that period of rapid growth, there were only 50,000 new dwellings constructed yet some experts are still convinced that the crash is coming. We’re not trying to prove the media wrong, but we are encouraging you to search beyond the sentiment and filter fact from fiction.

Trend Is Your Friend

Throughout the ages, property supply has ebbed and flowed in line with population growth and affordability and on the other side of every oversupply is an undersupply. Embrace the trend, it’s reassuring. Looking at the past, we know that property has doubled every 8 to 10 years and that on average, units gain 4.5% every year.

Hallmarks Of Homework

Before writing off your investment for fear of an oversupply, take a macro look at the Melbourne market. Last year, 7 out of the country’s top ten growth areas were in Greater Melbourne – find those areas and do your research. The hallmarks of a solid property investment are infrastructure, growth, schools, cafes, amenities and a growing population. You don’t need to be an expert to do your homework, it’s as easy as taking a drive and getting to know the neighbourhood.

Practice Patience

In the words of the Warren Buffet ‘Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.’ The short-term market sentiment is always irrational and fear breeds failure, so keep your focus on the future and remember that property is a long game. Before you take the property plunge, set yourself up for success and know your risks.

The problem with a lot of the commentary is that it gives a one-sided, somewhat sensationalised view of what’s going on and more often than not, it’s from an outsider's perspective. Sure, it’s easy to believe what you read, but at the end of the day, the question you should be asking yourself is whether the decisions you’re making are informed and aligned to your investment strategy. 

Marshall Condon is founder and chief executive officer of Neue Black.